AIG-owned United Guaranty opposes HARP 2.0 reps and warrants waivers
United Guaranty, the mortgage insurance subsidiary of AIG ($44.81 -0.33%), said Monday it refuses to accept all of the new HARP refinancing terms based on fears it will end up on the hook for fraudulently written or bad loans.
United Guaranty responded to HousingWire after Bloomberg News said the mortgage insurer refuses to provide blanket waivers on reps and warranties for mortgage lenders trying to get loans through the HARP process. Reps and warrants force originators to buy-back loans that were either poorly or fraudulently underwritten.
The appeal of HARP 2.0 is the fact it gives lenders the opportunity to move additional loans into refinancing without facing the risk of being forced to buy back bad loans.
United Guaranty says it supports HARP initiatives, but has concerns about waiving all reps and warrants.
"The mortgage insurance companies waving their reps and warranties are worried about upsetting their lender relationships," said Mark Herr, a spokesman for AIG. "We're worried about assuming someone else's fraud or negligence."
Herr added, "The real issue here is that some of the lenders with fraudulent or poorly documented or undocumented mortgages want to use the HARP program to relieve themselves of the risk tied to their bad lending decisions. They want us to surrender our legal protections against fraud."
"The GSEs rely on mortgage insurers to investigate loans for fraud and rely on these investigations to force lenders to repurchase fraudulent loans," he said. "Asking us to surrender our legal rights and not investigate loans for fraud means that the mortgage insurance companies, the GSEs and the tax payers would pay for their bad lending decisions. In effect, [it equates] a back door bailout on their bad mortgages."
On the other hand, Herr said the mortgage insurer is an advocate of HARP and remains committed to trying to get as many mortgages modified as possible.
“United Guaranty fully backs the HARP program and has been an industry leader in supporting it. In fact, due to high volumes of requests and the overall difficulty mortgage servicers have had in providing information, education and assistance - United Guaranty made the decision to dedicate resources toward helping borrowers in obtaining home retention programs," Herr wrote. "United Guaranty has insured approximately $3.4 billion in HARP loans since its inception in 2009, $1.3 billion in HARP loans in the first nine months of 2011 alone."
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